Calculating the Loan Payment on a Simple-Interest Installment Loan Installment loans allow borrowers to repay the...
Fantastic news! We've Found the answer you've been seeking!
Question:
![image text in transcribed](https://s3.amazonaws.com/si.experts.images/answers/2024/05/6657e1e3a2cdd_4916657e1e39df0c.jpg)
Transcribed Image Text:
Calculating the Loan Payment on a Simple-Interest Installment Loan Installment loans allow borrowers to repay the loan with periodic payments over time. They are more common than single-payment loans because it is easier for most people to pay a fixed amount periodically (usually monthly) than budget for paying one big amount in the future. Interest on installment loans may be computed using the simple interest method or the add-on method. For an installment loan using simple interest and equal payments throughout the life of the loan, a portion of each repayment is dedicated to the principal and a portion to the interest. Remember that interest is charged only on the outstanding balance. This means that as each payment is made, more of it is allocated to reducing the principal Monthly Installment Loan Payments to Repay a $1,000, Simple Interest Loan Number of Monthly Payments Rate of Interest 12 24 36 48 60 72 84 5 6 The following table lists the monthly installment payment amounts required to repay $1,000 over various time frames and at various fixed-interest rates. The payment is the same each month, and the allocation between principal and interest is always different 7 8 To estimate the required monthly payment amount for an installment loan, divide the amount to be borrowed by 1,000 and multiply the result by the appropriate figure from the table. 9 10 11 Suppose that you are repaying a debt-consolidation loan in the amount of $26,000. The rate of interest on the loan is 16%, and you have agreed to pay back the loan in 12 monthly payments. 12 13 14 Using the values in the preceding table, complete the following steps to calculate the required monthly payment amount for this loan. 15 16 $85.61 $43.87 $29.97 $23.03 $18.87 $16.10 $14.131 $86.07 $44.32 $30.42 $23.49 $19.33 $16.57 $14.61 $86.53 $44.77 $30.88 $23.95 $19.80 $17.05 $15.09 $86.99 $45.23 $31.34 $24.41 $20.28 $17.53 $15.59 $87.45 $45.68 $31.80 $24.88 $20.76 $18.03 $16.09 $87.92 $46.14 $32.27 $25.36 $21.25 $18.53 $16.60 $88.38 $46.61 $32.74 $25.85 $21.74 $19.03 $17.12 $88.85 $47.07 $33.21 $26.33 $22.24 $19.55 $17.65. $89.32 $47.54 $33.69 $26.83 $22.75 $20.07 $18.19 $89.79 $48.01 $34.18 $27.33 $23.27 $20.61 $18.74 $90.26 $48.49 $34.67 $27.83 $23.79 $90.73 $48.96 $35.16 $28.34 $24.32 $21.14 $19.27 $21.69 $19.86 Step 1: Divide the amount of the loan by 1,000. Dividing $26,000 (loan amount) by 1,000 gives you a value of 17 $91.20 $49.44 $35.65 $28.85 $24.85 $22.25 $20.44 18 Step 2: Use the rate of interest and the number of monthly payments to identify the appropriate figure to use from the table. In this case, the rate of interest is 16%, and the loan requires 12 monthly payments. Therefore, the relevant amount from the table is $[ 19 $91.68 $49.92 $36.15 $29.37 $25.39 $22.81 $21.02 $92.16 $50.41 $36.66 $29.90 $25.94 $23.38 $21.61 20 $92.63 $50.90 $37.16 $30.43 $26.49 $23.95 $22.21 Step 3: Multiply your answer from Step 1 by the appropriate value from the table cell (from Step 2). This gives you a required monthly payment amount of $ Calculate your total payments and finance charge by completing the following table. (Note: Enter all figures as positive numbers to two decimal places.) Total Payments $ Loan Amount Finance Charge $26,000.00 $ Calculating the Loan Payment on a Simple-Interest Installment Loan Installment loans allow borrowers to repay the loan with periodic payments over time. They are more common than single-payment loans because it is easier for most people to pay a fixed amount periodically (usually monthly) than budget for paying one big amount in the future. Interest on installment loans may be computed using the simple interest method or the add-on method. For an installment loan using simple interest and equal payments throughout the life of the loan, a portion of each repayment is dedicated to the principal and a portion to the interest. Remember that interest is charged only on the outstanding balance. This means that as each payment is made, more of it is allocated to reducing the principal Monthly Installment Loan Payments to Repay a $1,000, Simple Interest Loan Number of Monthly Payments Rate of Interest 12 24 36 48 60 72 84 5 6 The following table lists the monthly installment payment amounts required to repay $1,000 over various time frames and at various fixed-interest rates. The payment is the same each month, and the allocation between principal and interest is always different 7 8 To estimate the required monthly payment amount for an installment loan, divide the amount to be borrowed by 1,000 and multiply the result by the appropriate figure from the table. 9 10 11 Suppose that you are repaying a debt-consolidation loan in the amount of $26,000. The rate of interest on the loan is 16%, and you have agreed to pay back the loan in 12 monthly payments. 12 13 14 Using the values in the preceding table, complete the following steps to calculate the required monthly payment amount for this loan. 15 16 $85.61 $43.87 $29.97 $23.03 $18.87 $16.10 $14.131 $86.07 $44.32 $30.42 $23.49 $19.33 $16.57 $14.61 $86.53 $44.77 $30.88 $23.95 $19.80 $17.05 $15.09 $86.99 $45.23 $31.34 $24.41 $20.28 $17.53 $15.59 $87.45 $45.68 $31.80 $24.88 $20.76 $18.03 $16.09 $87.92 $46.14 $32.27 $25.36 $21.25 $18.53 $16.60 $88.38 $46.61 $32.74 $25.85 $21.74 $19.03 $17.12 $88.85 $47.07 $33.21 $26.33 $22.24 $19.55 $17.65. $89.32 $47.54 $33.69 $26.83 $22.75 $20.07 $18.19 $89.79 $48.01 $34.18 $27.33 $23.27 $20.61 $18.74 $90.26 $48.49 $34.67 $27.83 $23.79 $90.73 $48.96 $35.16 $28.34 $24.32 $21.14 $19.27 $21.69 $19.86 Step 1: Divide the amount of the loan by 1,000. Dividing $26,000 (loan amount) by 1,000 gives you a value of 17 $91.20 $49.44 $35.65 $28.85 $24.85 $22.25 $20.44 18 Step 2: Use the rate of interest and the number of monthly payments to identify the appropriate figure to use from the table. In this case, the rate of interest is 16%, and the loan requires 12 monthly payments. Therefore, the relevant amount from the table is $[ 19 $91.68 $49.92 $36.15 $29.37 $25.39 $22.81 $21.02 $92.16 $50.41 $36.66 $29.90 $25.94 $23.38 $21.61 20 $92.63 $50.90 $37.16 $30.43 $26.49 $23.95 $22.21 Step 3: Multiply your answer from Step 1 by the appropriate value from the table cell (from Step 2). This gives you a required monthly payment amount of $ Calculate your total payments and finance charge by completing the following table. (Note: Enter all figures as positive numbers to two decimal places.) Total Payments $ Loan Amount Finance Charge $26,000.00 $
Expert Answer:
Posted Date:
Students also viewed these accounting questions
-
A soft-drink dispensing machine is said to be out of control if the variance of the contents exceeds 1.15 deciliters. If a random sample of 25 drinks from this machine has a variance of 2.03...
-
If you were a division manager in a large firm, which of the following compensation packages would you prefer: (a) salary of f50000, with no bonus; (b) salary of BO 000, plus an annual bonus of 10%...
-
You have $1,500 to invest today at 7% interest compounded annually. a. Find how much you will have accumulated in the account at the end of (1) 3 years, (2) 6 years, and (3) 9 years. b. Use your...
-
F391 fx A " D 376 379 300 321 Long term debt by total asset Long term debt by shareholders equity Times interest eamed 304 EBITDA coverage ratio American Airlines Inc 2021 0.6951296648 2020...
-
Suppose a company like Target Distribution Centers is looking at 3 mutually exclusive Name Box for locations to build their new Distribution Center. Scenario 1 is a DC in Akron. CAPEX Cost $18...
-
Data Units Starting WIP: 2,000 Started: 900 Completed: 2,500 Completion rates Starting WIP Material rate: 80% Conversion rate: 40% Ending WIP Material rate: 30% Conversion rate: 60% Costs Period...
-
Suppose g(x) a function such that g (-2) = 7, g' (-2) = 5, g" (-2) = 6, and g(-2)=-24. What is the degree 3 Taylor polynomial of g(x) near x = -2?
-
1 . Explain the concepts Peace and Security? Discuss the importance and significance of global peace and security to national development.
-
Why do many North American sports teams want to keep their Native American names and symbols, although these are now often criticized?
-
Air Canada, the nation's flag carrier was founded in 1937 by the Canadian Parliament. It was first known as Trans-Canada Airlines and did not assume the current name until 1965. Throughout its...
-
Match the following statements with their authors: a) "Marketing is the delivery standard of living." b) "Marketing comprises both buying and selling activities." c) "Marketing is human activity...
-
Listed below are five scenarios. For each scenario, discuss the possible damages that can occur. Suggest a preventive control. a. An intruder taps into a telecommunications device and retrieves the...
-
Listed below are five scenarios. For each scenario, discuss the potential consequences and give a prevention technique. a. The systems operator opened a bag of burned. microwave popcorn directly...
-
The following information is stored in two relational database files: Required: a. Bogey works in personnel and Bacall works in payroll. Prepare a database authorization table that you feel is...
![Mobile App Logo](https://dsd5zvtm8ll6.cloudfront.net/includes/images/mobile/finalLogo.png)
Study smarter with the SolutionInn App